Under the tax law in 2012, you could claim all of your charitable contributions as a deduction on your federal income tax (if you decide to itemize your deductions) and the top marginal tax rate was 35 percent.
a. What is the cost of a $100 charitable contribution under 2012 tax law for someone who itemizes and who is in the top tax bracket?
b. The top marginal tax rate was raised to 39.6 percent in 2013. How would this change affect the cost of a $100 charitable contribution for someone who is in the top tax bracket?
c. One proposed change to the 2012 law would have left the top tax rate at 35 percent but would have placed a cap on itemized deductions of $25,000. Mr. Smith is in the top tax bracket and has $25,000 of deductions for property taxes and interest on a mortgage. How would this change affect Mr. Smith’s cost of a $100 charitable contribution?